SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1994 or
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-8888
AMOCO COMPANY
(Exact name of registrant as specified in its charter)
DELAWARE 36-3353184
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
200 EAST RANDOLPH DRIVE, CHICAGO, ILLINOIS 60601
(Address of principal executive offices) (Zip Code)
312-856-6111
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name, former address, and former fiscal year, if changed since
last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
Number of shares outstanding as of September 30, 1994--100.
Registrant meets the conditions set forth in General Instructions H(1)(a)
and (b) of Form 10-Q and is therefore filing this form with reduced
disclosure format.
1.
PART I--FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Statement of Income
(millions of dollars)
Three Months Nine Months
Ended Ended
September 30, September 30,
1994 1993 1994 1993
Revenues:
Sales and other operating
revenues..................... $ 6,201 $ 5,650 $17,502 $17,136
Consumer excise taxes.......... 883 696 2,553 2,018
Other income................... 120 67 682 133
Total revenues............... 7,204 6,413 20,737 19,287
Costs and Expenses:
Purchased crude oil, petroleum
products and merchandise..... 3,335 2,920 9,139 8,931
Operating expenses............. 1,002 913 3,100 3,025
Petroleum exploration expenses,
including exploratory dry
holes........................ 109 146 365 327
Selling and administrative
expenses..................... 479 409 1,426 1,223
Taxes other than income taxes.. 1,046 875 3,077 2,581
Depreciation, depletion,
amortization, and retirements
and abandonments............. 495 466 1,423 1,342
Interest expense............... 22 42 84 139
Total costs and expenses..... 6,488 5,771 18,614 17,568
Income before income taxes....... 716 642 2,123 1,719
Income taxes..................... 228 156 697 447
Net income....................... $ 488 $ 486 $ 1,426 $ 1,272
2.
Condensed Consolidated Statement of Financial Position
(millions of dollars)
Sept. 30, Dec. 31,
1994 1993
ASSETS
Current Assets:
Cash...................................... $ 107 $ 100
Marketable securities--at cost,
which approximates fair value........... 928 482
Accounts and notes receivable (less
allowances of $24 at September 30, 1994,
and $62 at December 31, 1993)........... 2,711 2,443
Inventories............................... 843 947
Prepaid expenses and income taxes......... 580 411
Total current assets.................... 5,169 4,383
Investments and Other Assets................ 1,212 1,027
Properties--at cost, less accumulated
depreciation, depletion and amortization
of $21,559 at September 30, 1994, and
$20,589 at December 31, 1993 (The
successful efforts method of accounting is
followed for costs incurred in oil and gas
producing activities)..................... 18,041 18,103
Total assets............................ $24,422 $23,513
LIABILITIES AND SHAREHOLDER'S EQUITY
Current Liabilities:
Current portion of long-term obligations.. $ 45 $ 51
Short-term obligations.................... - 652
Accounts payable.......................... 1,869 2,056
Accrued liabilities....................... 1,072 722
Taxes payable (including income taxes).... 546 495
Total current liabilities............... 3,532 3,976
Long-Term Debt.............................. 2,093 1,967
Deferred Credits and Other Non-Current
Liabilities:
Income taxes.............................. 2,464 2,372
Other..................................... 2,091 2,069
4,555 4,441
Shareholder's Equity........................ 14,242 13,129
Total liabilities and shareholder's
equity................................ $24,422 $23,513
3.
Condensed Consolidated Statement of Cash Flows
(millions of dollars)
Nine Months Ended
September 30,
1994 1993
Cash Flows From Operating Activities:
Net income.................................... $1,426 $1,272
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation, depletion, amortization, and
retirements and abandonments............. 1,423 1,342
Other...................................... (232) (820)
Net cash provided by operating activities. 2,617 1,794
Cash Flows From Investing Activities:
Capital expenditures.......................... (1,427) (1,689)
Proceeds from dispositions of property and
other assets................................ 143 170
Other......................................... (15) (40)
Net cash used in investing activities..... (1,299) (1,559)
Cash Flows From Financing Activities:
New long-term obligations..................... 171 532
Repayment of long-term obligations............ (46) (1,002)
Distributions to Amoco Corporation............ (338) (663)
Increase (decrease) in short-term obligations. (652) 279
Net cash used in financing activities..... (865) (854)
Increase (Decrease) in Cash & Mrktbl. Securities 453 (619)
Cash and Marketable Securities-Beginning of
Period........................................ 582 975
Cash and Marketable Securities-End of Period.... $1,035 $ 356
4.
Basis of Financial Statement Preparation
Amoco Company (the "Company") is a wholly owned subsidiary of Amoco
Corporation, an Indiana corporation ("Amoco"), and is the holding company
for all petroleum and chemical operations except Amoco Canada Petroleum
Company Ltd. ("Amoco Canada"). Amoco guarantees the outstanding public
debt obligations of the Company.
The condensed financial statements contained herein are unaudited and have
been prepared from the books and records of the Company. In the opinion of
management, the financial statements reflect all adjustments, consisting of
only normal recurring adjustments, necessary for a fair statement of the
results for the interim periods. The condensed financial statements have
been prepared in accordance with the instructions to Form 10-Q and,
therefore, do not include all information and notes necessary for a
complete presentation of results of operations, financial position and cash
flows in conformity with generally accepted accounting principles.
Item 2. Management's Narrative Analysis of Results of Operations
Results of Operations
Nine Months 1994 vs. Nine Months 1993
The Company earned $1,426 million for the first nine months of 1994,
compared with $1,272 million for the first nine months of 1993. Included
in current-year results were after-tax environmental charges of $32 million
and restructuring charges of $149 million. Of this latter amount, $51
million related to costs directly associated with severances of employees
expected to occur by mid-1995. The remaining $98 million was attributable
to various facility closings and asset dispositions. The 1994 results also
included after-tax benefits of $270 million relating to final settlements
with the Internal Revenue Service involving crude oil excise taxes ("COET")
in the 1980s. Results for 1993 included after-tax charges of $170 million
associated with the writedown of Congo exploration and production
operations to current recoverable value, and tax benefits of $54 million,
primarily related to the disposition of certain operations.
Adjusting both periods for these items, nine-month 1994 net income of
$1,337 million was $51 million below 1993's earnings of $1,388 million.
Exploration and production earnings were down primarily due to lower crude
oil prices, which averaged about $2 per barrel below last year's level.
Also contributing to the decline were lower refining, marketing and
transportation earnings attributable to lower refined product margins.
Partly offsetting were improved chemical earnings, resulting from higher
volumes and margins in major product lines.
Sales and other operating revenues totaled $17.5 billion for the first nine
months of 1994, slightly higher than the $17.1 billion reported in the
corresponding 1993 period. Natural gas revenues were up 22 percent
reflecting higher volumes worldwide, and chemical revenues increased 20
percent resulting from higher volumes and prices for major product lines.
Partly offsetting was a 13 percent drop in crude oil revenues due to lower
5.
prices and volumes.
Consumer excise taxes increased 27 percent for the first nine months of
1994, compared with last year's levels, reflecting the effect of a tax
increase on transportation fuels resulting from the enactment of Omnibus
Budget Reconciliation Act of 1993. Higher other income for the first nine
months of 1994 compared with the corresponding 1993 period, primarily
reflected the second-quarter 1994 COET settlement.
Purchases of crude oil, petroleum products and merchandise totaled $9.1
billion for the first nine months of 1994, slightly higher than 1993's
first nine months, primarily attributable to higher natural gas and refined
product volumes, and increased chemical purchases. Partly offsetting were
lower crude oil and refined product prices.
Operating expenses totaled $3.1 billion for the first nine months of 1994,
essentially level with the corresponding 1993 period. Second-quarter 1994
expenses included restructuring charges of $150 million related to various
facility closings and asset dispositions. First-quarter 1993 included
charges associated with the writedown of Congo exploration and production
operations. Excluding these items, operating expenses were slightly higher
due to increased chemical manufacturing expenses related to the fourth
quarter 1993 acquisition of Phillips Fibers Corporation, and higher
production expenses overseas reflecting added production.
Petroleum exploration expenses of $365 million in the first nine months of
1994 increased 12 percent, compared with the prior-year period, mainly
attributable to higher dry hole costs overseas. Selling and administrative
expenses for the first nine months of 1994 were up 17 percent, primarily
resulting from second-quarter 1994 restructuring charges of $79 million
related to severance costs, unfavorable currency effects and increases
related to natural gas activities.
Taxes other than income taxes increased 19 percent during the first nine
months of 1994, compared with the prior-year period, principally due to
increased consumer excise taxes. Interest expense decreased 40 percent for
the first nine months of 1994 compared with the like 1993 period, primarily
due to revised estimates of future tax obligations and the effects of debt
refinancing.
Third Quarter 1994 vs. Third Quarter 1993
Earnings for the third quarter of 1994 were $488 million, essentially level
with $486 million for the third quarter of 1993. Results for the current
quarter included after-tax charges of $32 million representing estimated
future costs of environmental remediation activities. Third-quarter 1993
earnings included benefits of $51 million related to prior-year taxes, more
than offset by adverse deferred taxes of $53 million resulting from the
enactment of the Omnibus Budget Reconciliation Act of 1993.
Excluding these items, third-quarter 1994 earnings of $520 million were $32
million higher than last year's third quarter earnings of $488 million.
Chemical earnings improved on the strength of higher volumes and margins in
6.
major product lines. Exploration and production earnings increased
reflecting higher crude oil prices, which averaged about $1 above the
similar 1993 period. Partly offsetting were lower refining, marketing and
transportation earnings due to lower refined product margins.
Third-quarter 1994 sales and other operating revenues of $6.2 billion were
10 percent higher than the $5.7 billion reported in 1993's third quarter.
Chemical revenues and natural gas revenues improved 29 percent and 19
percent, respectively, due to increased volumes and prices. Refined
product revenues increased 7 percent primarily resulting from higher sales
volumes.
Consumer excise taxes increased 27 percent for the third quarter of 1994,
compared with last year's levels, reflecting the effect of a tax increase
on transportation fuels resulting from the enactment of Omnibus Budget
Reconciliation Act of 1993.
Purchases of crude oil, petroleum products and merchandise totaled $3.3
billion for the third quarter of 1994, 14 percent higher than 1993's third
quarter, primarily attributable to higher natural gas purchase volumes.
Also contributing to the increase were higher crude oil and refined product
purchase prices, and increased chemical purchases.
Third-quarter 1994 operating expenses were 10 percent above 1993's third
quarter mainly reflecting higher environmental charges. Petroleum
exploration expenses of $109 million in the third quarter of 1994 decreased
25 percent, compared with the prior-year period, mainly attributable to
lower dry hole costs. Selling and administrative expenses were up 17
percent for the third quarter of 1994, due in part to unfavorable currency
effects and increases related to natural gas activities.
Taxes other than income taxes increased 20 percent during the current
quarter of 1994, compared with the prior-year period mainly due to
increased consumer excise taxes. Interest expense decreased 48 percent for
the current quarter compared with the corresponding 1993 period, primarily
due to revised estimates of future tax obligations and the effects of debt
refinancing.
Outlook
The Company and the oil industry will continue to be affected by the price
volatility of crude oil and natural gas. Also affecting chemical and
refining, marketing and transportation activities are crude oil prices and
the overall industry product supply and demand balance. The Company's
future performance is expected to be impacted by ongoing cost reduction
programs, the divestment of marginal properties and underperforming assets,
application of new technologies and new governmental regulation.
In July 1994, Amoco Corporation announced that its organizational structure
was being changed to improve profitability, increase operating flexibility
and position Amoco for long-term growth. Amoco's strategies now will be
carried out by 17 business groups. A newly created shared services
7.
organization will provide support service to the business groups. As a
result of the restructuring, an after-tax charge of $256 million was
accrued in the second quarter of 1994 by Amoco. Approximately 3,800
positions will be eliminated by July 1995. Through the third quarter of
1994, charges against the accrual associated with severance, representing
approximately 400 employees, and other costs totaled about $20 million
after tax.
An additional 700 positions will be eliminated by the end of 1996 as a
result of ongoing process redesign to improve efficiencies in support
functions. Additional restructuring costs of approximately $200
million (after-tax) are expected to be incurred by Amoco through
1996 to reflect costs for severance, system redesign, relocations,
work consolidation and development of new processes in support of the
restructuring. Through the third quarter of 1994, costs incurred related
to these activities were not significant.
Liquidity and Capital Resources
Cash flows from operating activities amounted to $2,617 million in the
first nine months of 1994 compared with $1,794 million in the comparable
1993 period. Working capital totaled $1,637 million at September 30, 1994,
up from $407 million at year-end 1993. Consequently, the Company's current
ratio increased to 1.46 to 1 at September 30, 1994, from 1.10 to 1 at year-
end 1993. As a matter of policy, the Company practices asset and liability
management techniques that are designed to minimize its investment in non-
cash working capital. This does not impair operating capability or
flexibility since the Company has ready access to both short-term and long-
term debt markets.
Amoco Oil Company, a wholly owned subsidiary of the Company, announced in
April 1994 that it had signed a letter of intent to negotiate a contract
with subsidiaries of Associates Corporation of North America ("Associates")
whereby Associates would issue and process Amoco Oil's consumer credit
cards. This transaction was completed in September. Effective September
20, 1994, Associates became the grantor of credit, owner of the receivables
and manager of credit risks for Amoco Oil's consumer credit cards.
The Company's debt totaled $2.1 billion at September 30, 1994, compared
with $2.7 billion at year-end 1993. The reduction in debt largely reflects
application of the proceeds from the sale of credit card receivables. The
Company's ratio of debt to debt-plus-equity was 13 percent at September 30,
1994, compared with 16.8 percent at year-end 1993. The ratio of earnings
to fixed charges was 17.1 to 1 for 1994's first nine months compared with
13.2 to 1 for the year ended December 31, 1993.
The Company believes its strong financial position will permit it to
finance business needs and opportunities in an orderly manner. To maintain
flexibility, a shelf registration statement for $500 million in debt
securities remains on file with the Securities and Exchange Commission to
permit ready access to capital markets.
8.
Capital and exploration expenditures totaled $1,792 million for the first
nine months of 1994 compared to the $2,016 million spent during the same
period of 1993.
The Company has provided in its accounts for the reasonably estimable
future costs of probable environmental remediation obligations relating to
various oil and gas operations, refineries, marketing sites and chemical
locations, including multiparty sites at which the Company and certain of
its subsidiaries have been identified as potentially responsible parties by
the U.S. Environmental Protection Agency. Such estimated costs will be
refined over time as remedial requirements and regulations become better
defined. However, any additional environmental costs cannot be reasonably
estimated at this time due to uncertainty of timing, the magnitude of
contamination, future technology, regulatory changes and other factors.
Although future costs could have a significant effect on the results of
operations in any one period, they are not expected to be material in
relation to the Company's liquidity or consolidated financial position. In
total, the accrued liability represents a reasonable best estimate of the
Company's remediation liability.
PART II--OTHER INFORMATION
Item 1. Legal Proceedings
There have been no material developments in the status of the legal
proceedings reported in Part I, Item 3 of the Company's 1993 Annual Report
on Form 10-K and the description of legal proceedings in Part II, Item 1 of
the Company's Report on Form 10-Q for the quarter ended June 30, 1994.
Twelve proceedings instituted by governmental authorities are pending or
known to be contemplated against the Company and certain of its
subsidiaries under federal, state or local environmental laws, each of
which could result in monetary sanctions in excess of $100,000. No
individual proceeding is, nor are the proceedings as a group, expected to
have a material adverse effect on the Company's consolidated cash flows,
financial position or results of operations. The Company estimates that in
the aggregate the monetary sanctions reasonably likely to be imposed from
these proceedings amount to approximately $5.9 million.
The Company has various other suits and claims pending against it among
which are several class actions for substantial monetary damages which in
the Company's opinion are not meritorious. While it is impossible to
estimate with certainty the ultimate legal and financial liability in
respect to these other suits and claims, the Company believes that the
aggregate amount will not be material in relation to its consolidated
financial position.
Item 2. Changes in Securities
Not applicable.
Item 3. Defaults upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 5. Other Information
Not applicable.
9.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Sequentially
Exhibit Numbered
Number Page
12 Statement Setting Forth Computation of Ratio
of Earnings to Fixed Charges.
27 Financial Data Schedule.
(b) No reports on Form 8-K were filed during the quarter
ended September 30, 1994.
10.
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Amoco Company
(Registrant)
Date: November 14, 1994
J. R. Reid
J. R. Reid
Vice President and Controller
(Duly Authorized and Chief
Accounting Officer)
11.